Forex in focus as Australia 200 trades a range

09:45, August 22nd 2016

The Australia 200 index has been confined to a 1.4% trading range over the past 2 weeks. Indications are that it will remain firmly within this range today. The US Dollar found some support in early trade this morning as markets assess the balance of risks leading into Janet Yellen's Jackson Hole speech.

The Australia 200 index has been confined to a 1.4% trading range over the past 2 weeks. Indications are that it will remain firmly within this range today. Low interest rates and the absence of bad news have put a floor under the broad market. While investors again have a slew of profit reports to consider, there are probably none on today’s calendar likely to jolt the index out of its range.

The US Dollar is finding some support in early trade this morning. Recent weakness has changed the balance or risk for currency traders as far as the Fed is concerned.

Traders have sold the US Dollar on the assumption that history will be repeated with the Fed opting for ongoing caution and delay in lifting rates. However, the decline in the US Dollar might actually make it easier for the Fed to deliver its next rate hike. While it seems unlikely that the Fed will lift rates prior to the US election, Janet Yellen may echo the recent sentiments of Fed Vice Chairman Fischer, perhaps sounding a little more confident about the economy when she speaks at Jackson Hole this Friday. Given recent weakness, this could attract US Dollar short covering, pushing the Aussie Dollar lower.